2015: The Start of Recovery of the Spanish Property Market

According to a report by by El Mundo’s property specialist Jorge Salido, reports the year is kicking off with optimism after green shoots appeared in 2014, and a new property market cycle has begun. El Mundo is one of Spain’s leading daily newspapers, with considerable influence over housing-market expectation.

Experts forecast increasing demand driven by price stability (no longer falling), cheap and accessible finance, and a rising supply of new building projects.

This optimism is reportedly shared by experts such as Gonzalo Bernardos, economist and head of the Masters degree in Property in the University of Barcelona; José García Montalvo, economist and lecturer at the Pompeu Fabra University; Julio Gil, President of the Foundation for Property Research (FEI in Spanish); and the property consultant, José Luis Ruiz Bartolomé.

These four experts agree that a positive alignment of price stability, mortgage lending, and new development sets the scene for a recovery in home sales, and a reactivation of the property sector, fundamental to the Spanish economy.

However, the experts warn that there are still some causes for concern. “During 2015 the market will again move at different speeds,” Julio Gil told El Mundo. “On the one hand, areas where prices will stabilise and on the other, places where price adjustment will continue more moderately,” Gil still worries about a huge excess supply and low household purchasing power.

Bernardos also points out that the increase in transactions will not be uniform. He highlights that consolidated areas in large cities (mainly Madrid and Barcelona), home to the upper and middle classes, will drive purchases. He even goes as far as predicting price rises over 10 per cent in these areas. “This high increase will contrast,” he adds, “with the stagnant prices that we’ll see in medium-sized cities and provincial capitals.”

Ruiz Bartolomé and García Montalvo take a stab at forecasting price movements this year. Ruiz Bartolomé cites a global range of -2 and +2 per cent and García Montalvo gives a range from -5 to +5 per cent, depending on the area. “There won’t be huge variations,” said Ruiz Bartolomé, pointing out that location is now more important than ever. “During the property bubble everything went up, but the market is now much more selective”.

Mortgage Lending

Along with stable prices, 2015 is also the year the experts reckon the banks will turn on the mortgage taps for clients who are clearly solvent. “In order to improve their turnovers, Spanish banks have no choice but to start lending again now that other lending alternatives are no longer an option. In addition, their balance books are healthy,” says García Montalvo.

García Montalvo expects mortgage lending to get competitive quickly, with a battle “to see who offers the lowest interest rates.” However, the lending frenzy will only benefit solvent borrowers. “Mortgages granted on the basis of temporary employment and low wages will not be back at least for a while,” he says. Bernardos, for his part forecasts the competition will turn into a “spectacular” war in the second half of the year

New Developments

The third factor expected to give the market a boost is the launch of attractive new developments, say the experts. Developers (in many shapes and forms) will start building again in response both to the new buyers and new credit. Demand will be stimulated by a greater choice of attractive new homes, they argue.

“We won’t see a general return of cranes,” explains Gil, “building activity will start more strongly in areas with a solvent demand for properties that should go on the market at reasonable prices. At the start of this year,” he continues, “banks will put more resources into financing development, cooperatives will continue to play an important role, the number of developers will increase and investment funds will join the sector.”

Bernardos talks of “a new sector of development” already leading new supply and leaving the boom properties behind. He says that three and four bedroom properties will be the norm in new projects and that, in general, all properties will be larger regardless of the number of bedrooms.

The experts conclude that 2015 will be a good year for buyers, but Gil warns that though 2015 will be better than 2014, we are not yet out of the woods. “There are reasons for optimism, but we must be careful because there were many excesses in the past and there’s still a number of risks and imbalances that will take time to disappear”.